Thursday, January 25, 2007

Migration in Eastern Europe - Getting it Right?

Earlier this week the World Bank published a large report on migration and remittances flows in Eastern Europe and Central Asia. The report is interesting to read and most importantly in my opinion it fields a very impressive dataset on the importance of remittances flow from emigrants towards Eastern Europe in terms of the general macroeconomic environment. However, the report has some weaknesses and some sadly some notable ones which also why I saw the need to pick on the report a few days ago over at GEM. But also the Eastern Europe correspondent at The Economist Edward Lucas directs a critique of the WB report in the latest Europe.View column.

So what are the issues here? Well, as Edward Lucas puts it ...

'Forget, for a moment, the headline stories from central and eastern Europe―the pipeline politics, the corruption scandals, the treasonous tycoons. The big story in the ex-communist world is people. Too few are being born. Too many are dying. And tens of millions have changed country.'

So this is in fact all about demographics and incidentally this is also where I am most dissapointed of the WB report; namely its lack of sensivity towards demographics in the region and generally its assumptions on future trends. In short, ... I have three overall remarks and points of criticism on the report.
  • Firstly there is Russia and although the report is not wrong per se in its analysis and description on Russia I believe the perspective is biased. Consequently, Russia is outlined as almost an immigration magnet for immigrants in especially the CIS countries. However the report does not adequately emphazise, in my opinion, the general dire state of Russia's demographics. A notable point here is as is also briefly mentioned in the report that Russia's population is declining despite the influz of immigrants. Moreover, I also believe this aspect could have been illuminated by incorporating some form of fertility component in the measures and assesments of intra-regional immigration
  • Secondly I am at odds with some of the reports assumptions on future trends for migration and comparisons. A notable example is how the region (Eastern Europe + CIS) in the future will be able to leverage immigration from Asia and Africa in order to offset ageing and population decline. This analysis is oddly based on the assumption that as the region no longer is to produce emigrants it will begin to demand immigration. This is of course true but it is not very likely in my opinion that this will be possible. Another similar point follows from the report's assumption that the East-West migration from Eastern Europe to EU at some point will reverse as the emigrants return to their home country. Can we really assume this?
  • Thirdly and finally I am a bit dissapointed that the report albeit its very comprehensive description and account for remittances flows does not take into account the human capital component of these flows as they are associated with an outward flux of a relatively scare ressource from Eastern Europe, namely skilled labour. This has long term growth implications specifically tied to many countries' ability to push up the value chain and also more importantly this is intimately tied to the large degree of remittance flows.
As I said in my post at GEM I might be unfairly cherrypicking the WB report but in essence I believe that the dots could have been connected much better than is the present case.


dave said...

[Apologies for xpost from GEM, but since there weren't other responses... :) - best, dave]

Interesting stuff, and sorry to come to it so late. But why shouldn't a future eastern Europe attract immigration in a similar way (if on a smaller scale, owing as much to changing conditions in the sending as the receiving countries) to the lands beyond the Elbe in earlier decades? I accept that this won't stop Russia's decline, but that country's particular problems aren't shared by non-CIS former CPEs.

I'm doubtless an optimist on this score. But I really don't see much basis for pessimism unless you're Russian, or Ukrainian, or Belarusian. Europe's future migration flows will be novel, unpredictable and fascinating, and a more interesting continent will emerge. This is one case where we need to seek out the silver lining and be sure to make the most of it in the brief time that it's available.

Edward Hugh said...

Hi Dave,

Thanks for this. In one sense you are right, since the EU members in Eastern Europe may well continue to benefit from migratory flows from outside the union. In the long run, as you indicate this will probably not be sustainable due to fertility and other issues in the sending countries, but this issue won't lock-in for some considerable time to come.

But this is a complex picture, and for these flows to work there will need to be a change in the political consensus about migration in the potential receiving countries: ie people will need to wake up to the fact that this is an issue, otherwise, in economic terms, they are all likely to start running into capacity problems in a decade or so.

In addition Claus and I are worried about the human capital implications if these countries continue to lose young educated people to the more westerly members of the union then this will make productivity growth (and hence living standard improvements) harder to sustain.

In the longer term (two decades or so) the big problem I see is that migrants are likely to become an increasingly scarce commodity, at least in terms of societies with some sort of cultural proximity. But then this is likely to be a problem which will affect everyone.

Also there is the issue of rapid population ageing which faces these societies, and again there are the public finance issues which that presents. Again, these problems are in principle no different from those which will be found in other developed countries, it is simply that the new accession countries are nothing like as rich as the other members of the union, so all sorts of affordability questions present themselves.

Bottom line, there are no blueprints here, and I am sure we are all in for all sorts of surprises, some of them undoubtedly good ones, but there is no guarantee that all of them will be benign in their consequences. The worrying part is really the fact that the institutional discourse still doesn't seem to take account of the potential magnitude or complexity of the problem.

Scott said...

In response to Dave's comment, the eastern European countries that are currently exporting people into Western Europe will suffer economic and technological stagnation, or put another way, negative productivity growth. What incentives will there be to attract immigrants to these countries? The young and educated are leaving certain eastern countries now because they can't find fulfilling, well paying jobs.

On the subject of Russia, I believe many of the immigrants from the CIS countries are ethnic Russians returning from places where they or their parents were shipped during the Soviet era. So I expect to see immigration from the CIS to decrease.
Along with Edward I don't see immigration from Asia and Africa to Eastern Europe or the CIS occurring at all. I see racial issues as one roadblock, with another roadblock being the fact that conditions in Russia outside of certain major cities are as bad as the conditions in many African countries now. I don't see much immigration from China to eastern Russia occurring, as economic conditions in rural China are not demonstrably worse than in eastern Russia. Plus, with its own aging population, China will want to keep its citizens at home.

Michael Lantz said...

I think Russia and Eastern Europe will one day become Muslim.The birth rates are declining in those Eastern Europe.The same thing is happening in Western Europe and North America as well.The people in the West are having less children, while the Third World countries population are exploding.I think the governments of those Eastern Europe ought to give families some kind of incentives so,they can have more children.